The warning runs contrary to present research indicating a robust online ad market. U.S. online advertising spending is expected to reach $16.7 billion this year, up from $12.5 billion last year, according to e-commerce-analysis firm eMarketer.
Yahoo now expects its third-quarter sales to come "in the bottom half" of the $1.1 billion to $1.2 billion estimates given in July, Yahoo Chief Financial Officer Sue Decker said.
"We are starting to see some advertising weakness in some of the most economically sensitive categories,'' Yahoo said in a regulatory filing released this afternoon. "Growth is still positive, but it is slower in Q3 than it was in the first half of the year."
Bad day for category
By midday, shares of Yahoo were down nearly 13% at $25.10 from $29.09. Rivals, who themselves rely heavily on ad revenue, were also hit hard. Shares of Google were off by 4%, and InterActiveCorp traded down 1.8%. Worse still, CNET Networks shares suffered a nasty 7.4% hit.
In July, Yahoo said it expected third-quarter revenue between $1.11 billion and $1.22 billion, excluding commissions paid to marketing partners. Analysts at the time were projecting revenue of about $1.2 billion for the quarter.
It's been a rough year for Yahoo investors. The company's shares -- down 35% this year from a 52-week high of $43.66 -- plummeted in January after Yahoo's fourth-quarter profit missed analysts' expectations. Then in July, the internet giant postponed the release of much-anticipated improvements to its search-advertisement system.
Dominance over MySpace
In August, about four in 10 online display ads were placed within Yahoo Mail, according to Nielsen/NetRatings AdRelevance. That's nearly three times the ad volume pulled in by its closest challenger, MySpace. And who's buying that ad space? Nielsen reported that financial-services companies were the largest online advertisers last month, accounting for 28% of online display ads.
The internet's share of global online-advertising budgets is expected to rise to 8.3% in 2012 from 3.7% in 2005, Merrill Lynch & Co. Analyst Justin Post wrote in a Sept. 12 report.